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Business

Keeping her cool in hot water: Watercare chair Margaret Devlin takes stock of a crisis

23 Oct, 2020 04:15 AM11 minutes to read
Auckland's drought crisis is making things worse for this year's budget. Video / Brett Phibbs / Supplied

Auckland's drought crisis is making things worse for this year's budget. Video / Brett Phibbs / Supplied

By
Andrea Fox

Herald business writer

VIEW PROFILE

Watercare chair Margaret Devlin is pretty zen for someone who is at the business end of the blame game chain for Auckland's water shortage.

As they'd say in her homeland Ireland, "there's not a bother on her".

That could be partly due to being a veteran professional company director, and by now adept at putting on a poker face. Or it could simply be the fact that she doesn't control the weather.

She's a warm person so it's not cool indifference. Devlin has devoted her career to managing public infrastructure - here and in the UK - so it's not as though she's oblivious to the fallout when it fails.

The simple reality, Devlin says, is that "we need it to rain".

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She offers another reality: "Auckland hasn't had water restrictions since 1993".

And one more: "Watercare has a statutory obligation to be a cost-efficient, minimum-cost provider, so we need to make sure we can demonstrate to Aucklanders, and to Auckland Council and shareholders, that Watercare is indeed being cost-efficient and a minimum-cost provider. Minimum-cost, of course, is not low-cost - it's minimum-cost".

Is that code for Watercare's purse strings being kept too tight for too long?

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Watercare is owned by Auckland Council but it's not funded by the council.

Its revenue comes from metered water and wastewater charges, infrastructure growth charges and external borrowing. And its capital expenditure demands are increasing - by $100 million in 2019. Since Auckland Council was established 10 years ago, Watercare has invested $2.5 billion in new infrastructure, yet it has extended debt by just $463m. That debt is consolidated into the council's debt, which reduces Watercare's headroom for borrowing.

But Devlin is not here to make excuses.

Watercare chair Margaret Devlin reminds Auckland it hadn't had water restrictions since 1993. Photo / Supplied
Watercare chair Margaret Devlin reminds Auckland it hadn't had water restrictions since 1993. Photo / Supplied

Questions about why Watercare wasn't better prepared for the drought - which Auckland mayor Phil Goff called a one-in-200-year event - and why it hadn't invested more in storage are "all valid", she says.

They've been angry questions - on social media and at a political level.

To bring on additional water sources, Watercare had to spend more than $200m that wasn't in its budget.

That resulted in Auckland councillors, already facing the impact of Covid-19 on council revenue, being handed a $44m expense they weren't expecting to treat water from the Waikato River.

Councillors' sensitivities were also bruised in July by some harsh findings in an independent report on the oversight of council-owned organisations.

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The report noted that stakeholders considered Watercare unprepared for the drought, and that its report to the council's audit and risk committee in the New Year fell short of compliance with the council's "no-surprises" policy. But it also found the council offered almost no practical strategic direction to these organisations. For water, there was no strategy at all.

As the political fur continued to fly in August, Watercare chief executive Raveen Jaduram resigned his $775,000-a-year job. He exits next week. A search is on for his replacement.

There was also talk that Devlin, chair since 2016, should step down. She was reported to have been carpeted by a furious mayor Goff, water being a highly political issue.

About this, Devlin will only say: "As you would expect within any family, there were some healthy discussions ... but actually the family all came together to say we have an issue, we need to fix it".

While she says the questions are valid, she doesn't agree that the drought was predictable.

"I know Niwa and the MetService have yet to give their final opinion on the current weather conditions, but the drought we are in is almost the worst since records began, and certainly the lack of rainfall from last November to May this year has been the driest period since records began.

"People say, surely you should have looked at this going forward, but at that stage there was no indication that the weather pattern was going to continue.

"One of the debates going around is, do you have a drought-proof system or a drought-resilient system? Either comes with dollars by the way. There is no cheap water available anymore."

While others have been quick to point the finger, Devlin is not playing that game today.

She says Auckland is the most efficient water user in the country. And yes, that's in part because it meters water.

She doesn't feel let down by weather forecasters, nor by Watercare staff who have worked "exceptionally" hard on the drought response and come in for abuse. Devlin has been personally jolted by some comments "that are not professional", but says her concern is for staff.

A criticism fired at her was that she has too many governance jobs - at least a dozen of them. Ironically, her speciality is audit and risk.

Watercare is her biggest job, she says, followed by chairing Lyttelton Port. Some are advisory boards, or don't meet frequently.

"I'm the first to admit I don't have my work/life balance right. But I never have. Ask my husband. But I love what I do and I thrive on it."

A handy scapegoat could have been the Resource Management Act. The city had been waiting seven years in a queue - of more than 100 applicants - for consent to take 200 million litres a day from the Waikato River.

Devlin's not going there either.

"It's no different to any consenting around the world which looks at levels in a river and the health and wellbeing of a river. There's been a lot of discussion around, if the consent had been given earlier would building [of Auckland water storage] started earlier? That may have been the case but if the river was at a level we couldn't take the water ... I think the drought has got mixed up with consenting."

Auckland's Cosseys dam in the Hunua Ranges looking parched in June. Photo / Supplied
Auckland's Cosseys dam in the Hunua Ranges looking parched in June. Photo / Supplied

Watercare has had a consent to take 150 million litres a day from the Waikato River since 1998. It has only done that since last year because it didn't have the treatment infrastructure to receive it all, fuelling accusations that it left things much too late.

In June, the Government stepped in. Technically, Watercare now has consent to take the 200m litres, but it's complicated. Devlin says really it only has consent for 175 million litres, and that relies on river levels.

"At certain times we can only take 150 million litres. We also have two other consents granted - one is using a Hamilton City Council consent they are not using, and we've got consent to take another 100 million litres during winter.

"They'll fall away when we get to 200 million litres. Ultimately, we'll only ever be taking about 300 million litres out of the river in totality."

Devlin says Watercare will learn from the crisis.

Two tough lessons could be just around the corner.

The organisation is digesting results of a benchmarking report it commissioned from the Scottish water regulator, yet to be made public, and late next month it is expecting another independent report it commissioned, this time on the quality - or not - of its preparedness.

Will Devlin step down if the results are critical?

"I'd rather not get distracted about what the outcome is," she says. "We want it done and we want to learn from it. Like the old saying, if you don't want the answer, don't ask the question. Let's find out how we can do things better."

Meanwhile, she says Watercare slipped up in its messaging to Auckland.

"Maybe we needed to be much clearer about the fact that putting restrictions on in any infrastructure network globally forms part of planning.

"While people might look at those restrictions as being a failure, actually our system is built on an assumption of a level of restrictions.

"Whereas the rest of the country is quite used to having water restrictions at some stage, there've been no restrictions [in Auckland] since 1993. I think that's where we didn't get the message across."

Devlin says restrictions hadn't been necessary because resilience has been built into the network since the 1993-94 drought. And yes, population growth and climate change have also been factored into planning.

"Watercare was criticised for its comment 'well, we need it to rain' but the reality is we need it to rain. That doesn't mean we were totally reliant on it raining, but our biggest dams, our biggest single sources of supply, are fed on rainwater."

The day Devlin spoke to the Herald, Watercare's reservoirs were at 67.7 per cent full. They dropped from 89.5 per cent on November 1 last year to 42.5 per cent on May 25, as Auckland received 60 per cent of its normal rainfall. Restrictions were imposed on May 16.

"Auckland people have been fantastic in their response," says Devlin. "In the peak summer period we were supplying 560 million litres of water a day. At peak demand during winter with restrictions on, demand dropped to 368 million litres a day.

"People have responded so well, I think it reflects recognition it was an unusual situation."

What's the outlook for restrictions?

Restrictions for commercial users were eased this month. They make up about 30 per cent of water customers and some have been vocal about their business loss.
Auckland householders should hear the verdict for them at the end of next month.

The forecast is for a wet and warm summer but, as Devlin says, it's only a forecast and Watercare's job is to safeguard water supplies for summer and into autumn.

"At this stage we are not out of the woods, the weather is still very unsettled."

By Christmas an additional 40 million litres a day will be coming in from a mix of sources including the Waikato River - the equivalent of enough water to meet the commercial and residential needs of 130,000 people.

Watercare is working on bringing in an extra 50 million litres a day from the river by May.

Water
Water

A management plan for the next 20 years is being finalised.

"We're looking at the permutations of what needs to be done and what the impact is on pricing. That discussion still has to happen," says Devlin.

Aucklanders' part in that price discussion should start from the end of November, she says. But over-arching this planning will be the Government's much bigger programme for national water reform.

In August the Government started national roadshows on a proposed huge shakeup in water and wastewater management, which includes a new national regulator and funding carrots for councils. Watercare's future could be up in the air.

Whatever is ahead, "there are a lot of zeros attached", says Devlin.

But there seems little prospect of any reform including privatisation of water to attract investment.

"The Government has been very clear, local government has been very clear and the legislation has been very clear. Water will not be privatised in any way, shape or form.

Auckland's Upper Mangatawhiri water reservoir shows mid-year drought impact. Photo / Supplied
Auckland's Upper Mangatawhiri water reservoir shows mid-year drought impact. Photo / Supplied

"I think sometimes people go down a rabbit hole about do we fix the [funding] problem. They say we'll just go to the private sector to get some money. The issue is, we need to understand what the problem is and what do we do to fix it. I think that's where the water reform programme is starting to get some real traction."

The recently passed Infrastructure Financing Act showed New Zealand has begun to look at different ways of funding water infrastructure, she says.

"But ultimately, of course, it all has to be paid for. And there isn't a mythical 'somebody'. Only one person has to pay, and that's the customer.

"We need to have a new relationship with water. We need to start treating it as precious.

"We do seriously need to look at other options such as purified recycled water and desalination because those things will become a reality at some stage. The question is when.

"Water is a finite resource."

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